January 17, 2014

Even though Congress negotiated a $1.1 trillion funding bill with language to delay increases in flood insurance premiums for the thousands of homeowners living near the coast, local real estate experts are convinced that the delay won't help Southwest Florida.

U.S. Senator Bill Nelson, D-Florida, announced on Jan. 14 that the funding bill prevented the expenditure of any money in this fiscal year to enforce higher premiums and asked FEMA to report on ways to keep rates low to Congress within 60 days.

Homeowners in flood zones are facing steep premium increases after the passing of the Biggert-Waters Flood Insurance Reform Act of 2012, an attempt to strengthen the National Flood Insurance Program after several catastrophic storms put it in $24 billion worth of debt, according to the National Association of Realtors.

Article Photos

Photo by Mckenzie Cassidy.

Biggert-Waters was designed to cut the amount of money subsidized to the NFIP and increase rates paid by policyholders to "full risk" amounts by redrawing flood maps, but Congress failed to follow through with an affordability study and homeowners may now see their rates more than quadruple.

Chris Heidrick, principal owner of Heidrick & Co. Insurance on Sanibel Island, said the delay won't have a substantial affect for Lee County.

"It only delays the implementation of a portion of Biggert-Waters," said Heidrick. "That portion is Section 207 which eliminates grandfathering. FEMA has already said it has no plans to implement 207 until late 2014."

He said the impact of Section 207 will be on the shoulders of homeowners who were grandfathered into the program because they had built before the most recent flood maps. The map revision process has already been initiated in Lee County and could take between 1-2 years, or 3-4 with a delay, but sooner or later homeowners will see their premiums skyrocket.

"It does nothing to provide relief for that person whose premiums have gone from $2,000 to $20,000, nothing to provide relief for those people who are currently benefitting from grandfathering, it does nothing for FEMA to get additional information to come up with a better, more appropriate plan to fix the National Flood Insurance Program," said Heidrick.

Local Realtors are also concerned about how these changes will affect the market because anyone who purchases a new property will be responsible for paying the "full risk" amount and that may discourage new buyers.

"Eliminating grandfathering increases uncertainty and has an impact on our real estate market," said Heidrick.

The only silver lining in revising the local maps is that the new technology being used could ensure that the flood maps are more accurate, which benefits homeowners in the long run.

Karen Swanbeck, managing partner of VIP Realty Group on Fort Myers Beach and 2014 president of the Realtor Association of Greater Fort Myers and the Beach, said there are a number of bills circulating the House and Senate that could delay the implementation of Biggert-Waters.

"If they would've followed the legislation as it was written and done the affordability study, I don't think we would be where we are today," said Swanbeck.

Homeowners in Florida contribute $4 in premiums each year to every $1 paid by the rest of the country, she said, and now she's afraid that those without mortgages will stop carrying flood insurance resulting in less premium dollars in the pool.

"We need to encourage people to contact their home state congressmen and senators to let them know how important this issue is," said Swanbeck. "Ultimately, when you have premiums that make it difficult for people to qualify for mortgages it becomes a cash market which puts pressure on values."

Even though a number of bills have been filed in Congress, both houses would have to agree on one solution, which has proved difficult with political gridlock in Washington, D.C.

Nelson, in a press release, said leaders from both political parties had agreed to the $1.1 trillion funding bill and he expected a majority of lawmakers from both sides of the aisle to support the measure.

"Congress, it seems, is finally hearing the pleas of some of the homeowners," said Nelson in a statement to the press. "This is only a partial solution and there is still work to be done."